Department of Statistics and Economic Research

Business Survey

WHAT IS A BUSINESS SURVEY?

The Banque du Liban's business survey can be defined as a business cycle analysis of conjunctural developments. The survey consists in capturing judgments on past, current and future economic developments. Its main objective is to depict the general trend in conjunctural developments, as well as to understand the nature of the sequence of evolution and to inform about future expectations in order to ensure that adequate decisions can be taken today.

Business Surveys or Economic Trend Surveys are conducted in different ways across countries and vary in detail. They typically cover business managers' judgements on the evolution of their businesses, as they gather "opinion polls" based on qualitative judgements on some principal economic variables (production, demand, inventories, investments, employment, etc.) These surveys differ from other surveys in the nature of questions asked, as they do not require any quantitative answers, but instead indications of movements in economic variables (trends). These trends reveal the way the economic situation is felt by enterprise managers during their business functions. One can obtain an indication of the trend followed by the main economic variables.

In other words, business surveys capture the cyclical position of the economy according to sentiment data based on surveyed managers' perceptions and anticipation.

WHY DOES THE CENTRAL BANK CONDUCT BUSINESS SURVEYS?

 

To enlighten monetary authorities

The main mission of the department of statistics and economic research at the Central Bank of Lebanon lies in gathering the necessary information that the Bank's authorities need in order to found their judgments and decisions to conduct monetary policy. The elaboration and publication of statistics as well as studies on the main economic sectors is the basis for the preparation of monetary policy. It is hence of primary importance to gather statistical data and provide analysis to better understand and evaluate the evolution of economic activity and/or to evaluate the impact of policies taken on economic activity.

 

To inform a large public

Business Surveys have their place in all major industrial countries and are well known among professional circles from decades ago. In Lebanon, the first survey was launched in 1995 in both the industrial and commercial sectors, followed in 1998 by a new survey in the Buildings and Publics works sector. These surveys are useful in informing a large public comprising of business managers, research centers, local and foreign investors, public administration, international organizations, etc.

 

To answer a need for regional and sectorial statistics

There is a lack of statistics on sectorial and regional developments in Lebanon. The BDL's surveys results are elaborated first at national level, and then at further two levels: a regional and a sectorial level. These are closely followed by regional authorities, as they depict the business trend in each Mohafaza. Sectorial results on the other hand have to be looked at with some reservation, as the Lebanese economy is not as diversified in this respect - which can cause bias in overall sectorial results.

 

Establish links with the business community

Firms that cooperate with the Central Bank by answering their questionnaire on a quarterly basis receive all Central Bank's publication free of charge. They can hence have access to the survey's results and be able to better assess their position in their sector of activity, and their region, as well as be aware of the general trends in business activity. They can also learn about the situation of industries situated upstream and downstream of their business. They can also benefit from their direct contact with their usual correspondent at the Bank for advise on various issues, related for instance to economic and financial documentation, as well as other services.

TECHNICAL PROCEDURES

The sample

The total number of enterprises surveyed today equals 900 enterprises approximately. Sampling is done following random stratified sampling. Enterprises have been chosen following strict rules on regional and sectorial weights. The majority of large firms are included in the sample as they represent a large market share. A selection of medium-and-small enterprises are also included in the sample, as they represent a large number of enterprises. SMEs are generally known to have a more pronounced direct impact of short-term economic developments, and are hence quicker to report changes in trends, being less able to avoid loss and/or ensure gain from changes in cyclical movements.

 

The questionnaire

The survey is rapid due mainly to simple questionnaires, containing a small number of questions, generally of a qualitative nature, which can be answered quickly by managers. The information requested relates to judgements on recent trends, on current situation and on expectations for near term developments of the main economic variables. Questions are formulated as multiple choice, requesting answers of type "up", "same" or "down", (i.e. "improve", "unchanged" or "worsen"). Questionnaires are filled by top managers, as they are better capable of answering questions without referring to accounts, and able to convey future anticipation of business evolution.

BALANCES OF OPINION

As business surveys seek to track judgements on tendencies, their usefulness derives from comparing results of different surveys overtime. Survey results for each question involve a figure for each qualitative answer reflecting the frequency distribution of answers expressed by respondents. To simplify the presentation of survey results, survey data are normally compiled as "balances" by subtracting the number answering "no" (or "worse") from the number answering "yes" (or "improve"). This allows the presentation of a single figure as a summary of responses to each question and representation of changes in those responses over time by a single time series. For example, if 47% of managers have reported an improvement in their production levels, while 25% have reported a decline, the balance of opinion relative to production is equal to 47 - 25 = 22.

It is important to note that balances of opinions do not represent a growth rate of the economic variable, but should be considered as indicators of the evolution in its trend.

SURVEY CALENDAR

The three quarterly surveys (Industry, Commerce, Buildings & public works) follow a strict calendar as the rapid publication of results requires the abidance to a set calendar.

Phase I - Dispatching of questionnaires to all enterprises

Questionnaires are sent to all enterprises either by fax, e-mail or personal visits. Faxes and e-mails are sent during the first few opening days of the months following the quarter under review. Visits are conducted during the first 1 to 2 weeks of that month. The team has representatives in each of the Bank's branches. These representatives are responsible for conducting the survey in their respective geographical areas, and ensure the continuous contact with the managers of those enterprises.

Phase II - The treatment of information by central authorities

The received questionnaires are centralised in the Bank's main branch in Hamra. All answers to all questions are entered in a special database program, that calculates balances of opinions by region and by sector (after weighting and seasonal adjustment have been applied). All other explanatory notes and commentary that figure on the questionnaires are read and summarised. The latter helps in overall assessment of changes in cyclical movements.

INTERPRETING TREND INDICATORS

Business surveys have gained their place among classical statistical surveys. In France, the first survey was launched in 1951 by l'INSEE. It was closely followed by Germany with the IFO INSTITUT. Today, an international body, called CIRET, has been created and is responsible for researching those types of surveys and publish relevant findings. In Lebanon, we have followed international experience and knowledge in order to conduct these surveys here. They are of special importance to us due to the lack of standard national statistics.

Empirically, trend indicators may strictly mirror movements in economic variables, they may lead shifts in economic variables, follow them with some delay, or be completely unrelated. Hence, these indicators are most useful for economic analysis and forecasting when they lead cyclical economic movements.

It appears to be a widespread phenomenon that large changes in confidence signal a significant concurrent or future change in output growth relative to trend, and that a significant change in growth is unlikely to be sustained if not rapidly accompanied by a large change in confidence.

However, even if these indicators merely reflect in a coincidental way cyclical changes, they may still be useful to the extent that they are more readily available than hard quantitative economic data.

The lesson to remember from the various world-wide literature on the subject, is that, business surveys provide a good picture of major cyclical movements in output, as they may help detect significant acceleration or deceleration in output growth when large changes in sentiment is observed. They fail however to track in a consistent way small output swings, and they do not show any consistent sequential behaviour with respect to output movements.